5 Tips for Effectively Paying Off Student Loans

When I graduated from university, I joined the growing mass of adults in debt who have to pay back their student loans.  But unlike many, I was determined to get out of debt as soon as I could.  An overseas teaching job helped with that, and I was fortunate enough to pay back more than $20K in two years.  Now that was an incredible feat, and when I told another ALT (assistant language teacher) about it, she expressed her jealousy in the most direct manner she could.  She said, "I hate you for that."  How frustrating.  I was rewarded for my hard work with a blunt, ignorant statement.  She had the same job as me and was making the same amount of money, so she had every opportunity to do what I did.

What that person was missing was self-discipline. 
It's a word some lazy people praise others with while denouncing their own abilities.  And I'm sick of it.  If you want to get out of debt, then get out of it.  There's no one stopping you but yourself.  If I did it, then you can do it, too, and I believe these five tips will help you get started.

1.    Start Paying Back ASAP

The sooner you start paying, the sooner your loans will be gone.  Canadians like myself have six months from the day they graduate to start paying back debt.  There's no getting out of it.  I sent money home as soon as I could to make the first minimum payment.  Some countries, like Australia (so I've heard), don't have a set start date for paying back.  That can be quite dangerous because you may put it off for months or even years.  I recommend getting on it, and don't go complaining about it either.  Complaining will just cause more stress.  Debt is debt and it's not going to get any more or less by worrying about it all the time.  Take the plunge and get to it.

2.    Set a Budget

You’re going to have to organize your finances, and you have to keep track of how much you make and how much you spend.  This isn't just a one time gig, either.  Finances take constant maintenance.  Work out how much you're earning, how much necessities like rent/utilities you have to pay (all my utilities are separate, so I had to add things up), and your internet/phone bill.  Once you've figured that out, work out how much you spend on food, personal supplies, and car fuel.  Add them up and subtract your monthly expenses from your net income.

The leftover income is your own hard-earned cash, free to spend on whatever you like.  Except now you have student loans.  The Canadian student loan centre automatically works out a minimum payment, so you'll have to work this into your monthly expenses.  That being said...

3.    Pay As Much Per Month As You Can

The longer you pay, the more your interest will build up.  Pretty soon, your interest makes up for half the loans you started out with just because you paid the bare minimum over such a long period of time.  I recommend paying as much as you can per month.  After working out your budget, figure out how much you want to pay while still being able to live comfortably.  Every month, I made a second additional payment on top of the minimum payment automatically being taken out of my account.  It sounds like a lot, and it may mean you have to cut some things out of your expenses.  Speaking of which...

4.    Make Sacrifices

This and the fifth point go hand in hand.  Say you like shopping for clothes.  Well, the cost of clothes adds up, and let's face it, you really don't need an extra pair of shoes.  You already have ten pairs for every kind of weather anyway.  You've lived without them until now, so you can live with them for longer if need be.

This doesn't mean you have to deny yourself everything, but you should learn to control what you spend your money on.  (There's that keyword, self-discipline, again).  Throwing money at whatever comes your way isn't going to help your debt situation.  That might mean limiting your Friday night bar hopping to once a month instead of every weekend.

5.    Don't Compromise!

One of the wisest things my mother ever said to me was, "just because you want it, doesn't mean you need it."  You've made a budget.  You have a plan for getting all your loans paid off in the next five to ten years.  Don't blow it by giving in to that one time you're itching to buy that new HD TV or expensive sound system.  Don't buy something unless 1) you have the money to spare from all the extra you saved from the excess of your income, and 2) you've thought about it for a while.  I brooded over buying an iPad mini for four months before actually getting one.  That was after saving all the extra income left over from my pay cheques and considering how much use I would get out of it.  It ended up being a good move as my computer is quite old and I needed something smaller and lighter that I could easily take to work.

BUT don't miss a student loan payment just because you want to buy something.  Sure, sometimes things come up and you can't make that extra payment per month.  I went back to Canada a few times and had to miss a couple of my additional payments because of flight costs, but I was quick to get back into my monthly paying routine once I got back to Japan.  I also keep a hefty failsafe in my bank account in case of emergencies.  For the record, I don't live by every pay cheque.  I'm a saver, and it's taken years to master.

You may feel like these five tips restrict you from having a good life, but believe me, when you see that final loan balance reach $0.00, you'll be the happiest person alive.  Reward yourself for your accomplishment when you get it done.  I think I bought myself a secondhand TV.  Sure beats the time I spent watching movies on my iPad mini.

Again, these tips are what worked for me.  I am blessed enough to have a temporary well-paying job, but I do believe anyone can apply these tips to their financial situation.  Like I said, all it takes is self-discipline, and every single one of you have it.  So good luck!  You can do it!